The UK officially experienced a recession towards the end of last year after a significant economic decline, but Chancellor Jeremy Hunt defends his administration’s efforts to keep the economy stable.
Economic Downturn Revealed
It has been revealed that the UK entered a recession in the final month of 2023, just months prior to an upcoming general election. However, Chancellor Jeremy Hunt still defends the economy.
According to the definition of a recession, the UK has experienced one over the last six months due to the contraction of the economy over two three-month periods. Still, economists think it’s harsh given the circumstances.
Official figures from the Office for National Statistics indicate a 0.3% contraction in Gross Domestic Product (GDP) during the final quarter of 2023, following a 0.1% decline from July to September.
Hunt Defends Recession Announcement
On the morning of the revelation, Chancellor Jeremy Hunt said he would “only cut taxes in a way that was responsible” and that the UK economy was “turning a corner” despite the recession.
Hunt insisted, “Forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down, and unemployment remains low.”
Hunt acknowledged that families are still struggling but insisted things are getting better, “Although times are still tough for many families, we must stick to the plan – cutting taxes on work and business to build a stronger economy.
Labour’s Response
Labour has responded to Hunt’s defence of the UK economy by calling the Chancellor “out of touch.”
Labour leader Sir Keir Starmer said that this country’s “working people” have had to put up with “14 years of Tory economic decline.”
UK GDP only grew by 0.1% in 2023 after a robust 4.3% growth in 2022, which is the least amount of growth in the economy since the aftermath of the last recession in 2009.
Rachel Reeves, Labour’s Sadhow Chancellor, has said, “This is Rishi Sunak’s recession, and the news will be deeply worrying for families and businesses across Britain.”
Sectoral Impact
According to Liz McKeown, ONS director of economic statistics, “All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery.”
The economy hasn’t changed a great deal in 2023, with McKeown saying, “Across 2023 as a whole, the economy has been broadly flat.”
Shadow Chancellor Reeves went on to say, “It is time for a change. We need an election now to give the British people the chance to vote for a changed Labour Party that has a long-term plan for more jobs, more investment and cheaper bills.”
Political Implications
This revelation of a recession is a huge blow for Prime Minister Rishi Sunak, with Labour already predicted a landslide victory in the polls.
Economist Samuel Tombs argued that calling the decline a “recession” is rather harsh, “It’s overly dramatic to label the decline in economic activity in the second half of 2023 a recession,” he said.
Tombs’s reasoning lies in the argument that “employment continued to rise, real wages rebounded and measures of business and consumer confidence returned to levels consistent with rising activity by the end of the year.”
Inflation Dynamics
Inflation has done well in 2024, as annual UK inflation remained at 4% in January, surpassing expectations but still doubling the Bank of England’s target of 2%.
Salaries have been growing, with average wages outpacing inflation and growing at a rate of 6.2% in the three months to December.
Despite the positives to be taken out of the current UK economy, the words recession will do no favours to Sunak’s bid to secure a second term as PM come to the election.
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The post Chancellor Hunt Defends His Efforts, Despite Recession first appeared on Edge Media.
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